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RBI keeps repo rates unchanged at 6.25%


Image Credits: Hindustan Times

By Anirudh Saligrama


05 April 2017: The Reserve Bank of India (RBI) kept repo rates unchanged at 6.25% in its monetary policy review today. The reason for this was scaling consumer price index (CPI) at a medium-term target for inflation of four per cent within a band of +2 to -2 per cent.
The RBI however raises Reverse Repo rates by 25 basis points to six per cent and cuts Marginal Standing Facility (MSF) rates by 25 basis points to 6.5 per cent. MSF is a provision where the RBI lends banks at a state when there is absolute dry up of liquidity in the inter-bank. 

According to sources and reports by Economic Times, Central Bank said, “The pace of remonetisation will continue to trigger a rebound in discretionary consumer spending. Activity in cash-intensive retail trade, hotels and restaurants, transportation and unorganised segments has largely been restored.”

“External demand should support domestic growth. Downside risks to the projected growth path stem from the outturn of the south west monsoon; ebbing consumer optimism on the outlook for income, the general economic situation and employment as polled in the March 2017 round of the Reserve Bank’s consumer confidence survey; and, commodity prices, other than crude, hardening further,” RBI added, as per ET reports.

“The future course of monetary policy will depend mostly upon the incoming data of progression of macroeconomic conditions. The inflation is projected to average 4.5 per cent during the first half of the 2017 and five per cent during the second half" said RBI Governor Urjit Patel during the monetary policy review.
The Central Bank further said that the Gross Domestic Product (GDP) is projected to to 7.4 per cent in 2017-2018 from 6.7 per cent in 2016-2017. 

The future course of monetary policy will largely depend on incoming data on how macroeconomic conditions are evolving.
This review is the third monetary policy review after Urjit Patel took charge (date) as RBI Governor in which the Governor kept the Ro Rates unchanged.


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